South Korea's Kakao Corp. has terminated talks with MBK Partners to sell a stake in Kakao Mobility Corp., the country’s No. 1 taxi-hailing app, in the face of pushback from its employees and unionized replacement drivers.
The largest mobile messenger operator in South Korea had been in negotiations with MBK to sell part of its shares in the mobility platform, alongside those from two other major shareholders TPG and Carlyle.
The deal, if successful, would have made the private equity firm the single largest shareholder in Kakao Mobility, a deal estimated worth up to 10 trillion won ($7.6 billion).
“We had considered changing the shareholder structure of Kakao Mobility, but decided to stop the process,” the company said in a regulatory filing on Thursday.
The company recently conveyed its decision to the North Asia-focused PE firm, according to sources familiar with the matter.
"We respect the sustainable growth strategy agreed upon between Kakao Mobility's management and the labor union. We will support them to carry it out with specific plans," Kakao said in a separate statement.
Last month, Kakao said that it was considering unloading about a 10% stake in the mobility platform. At the time, it did not identify the negotiating partner.
The statement was made in response to a report from The Korea Economic Daily in June that Kakao was in talks with MBK to sell some shares in the mobility services provider.
In its most recent fundraising, the company was valued at around 8.5 trillion won ($6.5 billion). Kakao Mobility's operations range from taxi-hailing, designated driver and navigation services to parking reservations
Kakao owns 57.5% of the mobility platform. A TPG-led consortium and The Carlyle Group hold 29% and 6.2% stakes as the second and third-largest shareholders, respectively.
RESISTANCE FROM REPLACEMENT DRIVERSThe stake sale plan met with strong resistance from Kakao Mobility’s employees and a labor union of replacement drivers, who expressed their displeasure with the potential buyer: a private equity firm.
To allay their concerns, Kakao Mobility CEO Alex Ryu asked its parent company Kakao to hold off on the stake sale process. Instead, he presented sustainable business models to a Kakao committee that acts as the board of directors.
About 150,000 replacement drivers, registered on its platform, offer services through Kakao Mobility, but they don’t belong to the company.
Since Kakao is now under increased regulatory scrutiny over its sprawling business, however, it has come to listen to their demands.
Last year, it agreed to discuss an adjustment of the commission rate it charged for arranging designated driving services.
DELAYED EXITThe cancellation of the stake sale plan would further delay financial investors' divestment of the mobility company.
Last year, Kakao Mobility received a string of
pre-IPO funding worth $500 million, including $200 million from Carlyle.
In return for their investments, its parent firm promised to aid their exit either through
an initial public offering or a stake sale.
Last year, Kakao Mobility embarked on its own IPO plan but suspended the process to enter into negotiations with MBK.
Now the company may need to return to the IPO plan, for which the valuation will remain the biggest issue in the rapidly cooling IPO market.
(Updated with details)Write to Jun-Ho Cha at
ahacha@hankyung.comYeonhee Kim edited this article.
